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13-10-2020, 21:53   #1
questionsGuy27
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How does bank view savings? And advice what to do?

Hi,

I am 27, single and I am planning to apply for mortgage soon.
My salary is 48'000, so I know it will be difficult as single applicant.

I have €36'000 that I got recently (payout) and I've been saving for past 3 months (€1k, €1k, €400 due to holiday) [So €38'400 Total] and I plan to save €1k p/m for another 3 months and then go see mortgage advisor. (I only recently found out - doesn't matter if you have money for deposit or not - you need to show history of savings)

1) Just wondering how does bank view savings?
If I was to take out €10'000 right now from my savings (my payout and savings is under one account in bank), would that count that I've saved €0 over past 3 months? (Because I took out more than I saved?)

Could I somehow indicate that I am taking this out of my payout rather than savings I've been making into same account?


2) Let's say if I need €10'000 for a new-ish car, would I be better off getting loan or take it out of my payout money (depends on advice to Question 1 I guess)?


3) What's the minimum you need to make in savings per month to have good chance of getting mortgage? I am currently aiming for €1000 per month savings, would they require more?

4) I heard you can also use proof of rent payments towards mortgage application, my rent is 700 per month and I am renting room with no contract, will they see this consistent payment monthly or should I somehow request my house mate/landlord for written proof?
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18-10-2020, 00:17   #2
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18-10-2020, 00:25   #3
salamiii
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Maximum loan is generally 3.5 times gross annual income and 80% of the property value (90% of the property value for first time buyers).
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18-10-2020, 00:28   #4
goldenhoarde
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Pay rent by bank transfer and mark as rent using reference field

Will show then on bank statement
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18-10-2020, 00:32   #5
questionsGuy27
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Quote:
Originally Posted by goldenhoarde View Post
Pay rent by bank transfer and mark as rent using reference field

Will show then on bank statement
Yeah I have that for the past 3 years, so that can be considered as "Savings"?
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18-10-2020, 00:46   #6
Geuze
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If you don't have a record of regular saving before three months ago, that may be questioned.

On the other hand, rent paid is taken into account, so a history of rent paid looks good.

Personally, I would expect a single person on 48k to pay rent and save maybe 700 pm.
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18-10-2020, 00:49   #7
Geuze
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48k gross = 4k pm.

4k gross is what net?

I calculate 11,640 in tax and PRSI.

So say 34k net, or 2833 net per month.

Rent = 700
Save = 700
1433 left
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18-10-2020, 01:06   #8
questionsGuy27
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Quote:
Originally Posted by Geuze View Post
48k gross = 4k pm.

4k gross is what net?

I calculate 11,640 in tax and PRSI.

So say 34k net, or 2833 net per month.

Rent = 700
Save = 700
1433 left
I am putting 1k into savings.
400 into investments.

~700 left for subscriptions (modern age huh), and living expenses.

My main query is on taking out 10k loan vs withdrawing 10k from savings that is combined with lump sum I have - which of those has bigger impact on application (if any or both)

Guess I should've started saving into separate account?
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18-10-2020, 07:05   #9
Black_Knight
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Disregarding the 36k payout (one time thing, not going to repeat), it sounds like you've saved a net total of 2400 in the last X years. To me, that doesn't demonstrate a reliable history of savings. Taking 10k from your pool of money seems "wreckless" given the details you've mentioned. If it needs to be done it needs to be done, but likely at the expense of buying a house in the near term. If I were a bank I'd look at this history and think this person doesn't consider things long term, and thus is a more risky client to take on.

As a single buyer it's going to be harder to afford something. 168k is the max you can borrow, so you might need to rely heavily on your savings to get something (depends where you buy of course).

When did you decide you wanted to buy a house? These are long term financial commitments but my best guess is 3-4 months ago you seen this payout on the horizon and thought about buying, so started saving. Banks will want somewhere between 6-12 months of bank statements, so your goal should be to get at least 6 months of regular savings and expenses.
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18-10-2020, 10:08   #10
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2 aspects of savings are important for difference reasons:

A) The stock of savings - to cover the deposit requirement (10% requirement) and ancillary costs of purchasing (stamp duty, legal fees etc.).

B) The flow of savings - to show you have spare money each month to live and more importantly, from the banks perspective, pay the mortgage.

The flow of savings is regular income less regular expenses. Regular for a bank means looking back 6 months. They could look further back but the general idea is if you can be financially prudent for 6 months it's a reasonable guess you'll be able to do this long term. The more you regularly save the better it looks. When you buy you won't have to pay rent so savings plus current rent is a good gauge of what you can afford to repay. This is what banks will work with when they work out the maximum they will lend to you. To prove all this you'll need to back it up with documentation and bank statements. Avoid paying rent by cash unless you've got good documentation. If there's any doubt about a a source of income/expense the bank will take the most conservative view from their perspective.

What happened before 6 months doesn't really matter when looking at B above (it does if you've defaulted/gone into arrears but let's assume that's not the case). Likewise a payout tells the bank nothing about how financially prudent you are month to month. It does however count towards your deposit requirement or., A above.

How will banks look at you spending 10k? Well it depends what you're spending it on. A car purchase is -for most people - not a regular expenses. For examining the flow of savings a lender will ignore it.

Should you borrow or use savings for the car? There's always a trade off between the impact on A and B above. If you still have enough savings to meet the purchase price (a minimum of 10% of the purchase price or more if the price/mortgage requires it) then you're probably better off using savings. Regular loan repayments will count as a regular expense so so reduce the amount the bank thinks you can repay I.e., B above.

As to the question how much savings is enough... Well it depends on how much you want to borrow. The more you borrow the highest your regular savings you will have to be to prove you can meet the regular payments. Each bank will have slightly different rules around this. Easiest thing to do is ask them. Likewise the higher the price the higher your 10% deposit will be in € terms.
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